UK jobs market at crossroads as key support program ends

Hundreds of thousands of jobs hang in the balance as coronavirus cases surge in Britain and the government scales back its support for workers

Through the pandemic, a generous government salary support scheme kept unemployment in check, but it ends Saturday. It will be replaced by a less generous and more targeted program that seeks to encourage firms struggling with coronavirus restrictions, such as cinemas, pubs and restaurants, to keep workers even if they only work one day a week.

When launched in March, the Job Retention Scheme was designed to prevent mass unemployment during the lockdown, with the government effectively bankrolling firms to keep staff on payroll even though they couldn't work.

It was one of Europe's most generous furlough schemes and helped prevent what some economists feared could be an almost immediate doubling in unemployment to 3 million, a level not reached since the early 1990s.

At the pandemic's height in May, the government was paying 80% of the wages of nearly 9 million people, or around a third of the workforce, up to 2,500 pounds ($3,250) a month. Though the number decreased during the summer as lockdown restrictions were eased, there are still up to 2 million people relying on wage support.

“Many people working in the sectors hardest hit by the pandemic, such as travel, entertainment and hospitality, have seen their lives and livelihoods completely devastated this year and are questioning what to do next,” said Josh Graff, head of LinkedIn’s U.K. operations, noting that there are 64% more people applying for each job than before the pandemic.

Though Treasury chief Rishi Sunak has responded to concerns by bolstering a replacement program, many people in sectors struggling to survive in a world of social distancing are unsurprisingly anxious.

Paul Johnston-Naylor, a manager of a multiplex for a major national cinema chain, is ready to do anything, from working as a delivery driver for a supermarket to helping out at the local COVID test center, to plug a 600-pound ($780) hole in his family's monthly budget that will appear when the furlough program ends and he's moved onto the replacement scheme.

“We don’t know what’s coming over the next few months and next year, so for me it’s just about being as proactive as you possibly can and upskilling yourself as an individual," he said.

Cinemas, like other businesses requiring the close proximity of people to make ends meet, have struggled since being allowed to reopen in July. The delay in the release of the next James Bond film “No Time To Die" didn't help, prompting many cinemas to temporarily close their doors again.

Though the furlough program prevented mass unemployment at a time when the British economy shrank by nearly a quarter, the jobless rate has edged up during the pandemic, from a four-decade low of 3.8% to 4.5%, with the likes of British Airways, Royal Mail and Rolls-Royce all laying off thousands.

“The Job Retention Scheme was a lifeline but this is a jobs crisis that’s stretching out over time,” said Carolyn Fairbairn, the outgoing head of the Confederation for British Industry.

The Resolution Foundation think-tank found that more than half the workers furloughed during the lockdown had returned to work by September, but that around a third are still fully or partially furloughed. It also found that minorities and younger people are more likely to be left jobless and warned that a sharp rise in unemployment is “inevitable” despite improvements to the new support program coming in place on Nov. 1.

Under the terms of the revised replacement job support scheme, an employee in a firm facing decreased demand because of the pandemic has to work 20% of their usual hours to get further support, something they didn't have to do with the furlough scheme. If that threshold is met, pay can be topped up, mainly with government subsidies. Employees will take home at least 73% of their normal wages where they earn 3,125 pounds a month or less.

Employees of businesses such as pubs, nail salons and gyms that are forced to close in areas of the country facing heightened restrictions can receive two-thirds of their salary from the government, up to a maximum of 2,083 pounds ($2,707) per month. Both the subsidy rate and the cap are lower than the expiring furlough scheme. Employers have the discretion to pay more than this.

Despite welcoming the changes, the Institute for Employment Studies warned that up to half a million furloughed jobs, particularly in hospitality and the arts, “could still be at risk" as employers “struggle to bring workers back for the minimum one day a week required.”

Lorenzo Nargi, co-director of three Lorenzo Italian restaurants and one cafe in southeast London, has already had to make some tough decisions as he tries to keep his family business afloat through the winter and any further enforced closures. He has already laid off around a third of his pre-pandemic 35-strong workforce, while another 10 or so have left.

“My hope is that we've restructured enough to retain staff even if they shut down the floors,” he said. “I would hope that everyone we've got employed is for the long-term.”

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